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The doctrine of exhaustion of trademark right and the issue of parallel import in the European community and in the Republic of Bulgaria One of the main goals of European integration is the freedom of commodities movement and the establishment of a Common market within the European Community. To achieve this goal, article 30 (the present Art. 28) of the EEC Contract as of 1957 envisions a prohibition for the member-countries to introduce quantity restrictions on import, as well as other measures with equal effect. The text regulates the matter in a general way and does not specify clearly what is included in the term "measures with equal effect". In view of the problems aroused in practice regarding the application of article 30 in relation to intellectual property rights in the different countries, the European Court in Luxembourg has passed several explicit judgements, stating that the intellectual property rights have limited effect on the movement of commodities. The first decision of the European Court in this respect is in case No. 78 as of 1970 - Deutsche Grammophoï GmbH vårsus Metro-SB GmbH. In its decision the Court explicitly specifies that once the trademark right owner has exercised it, a following prohibition on his part of the sale of the same product in another member-country of the Community will defy Art. 30 of the European Community Contract and the principle of free movement of commodities. In this case the European Court distinguishes for the first time between “existence" of the intellectual property right and its "exercise". Thus the Court recognizes the existence of the exclusive nature of the intellectual property right and guarantees protection to its bearer. At the same time the Court restricts this right within limits, in which its exercise will not harm the interests of the traders who have purchased the respective commodity with the intention to resell it, as well as of the consumers. In its context this distinction is based on the idea that the existence of intellectual property rights is regulated according to the national legislation of the member-countries, whereas its exercise within EC should be coordinated with the European legislation. Some years later, in the decision on case No. 16 of 1974, Ceïtrafarm versus Winthrop, the European Court develops further the idea of existence and exercise of the intellectual property right, and this time considers specifically the issue of exercising exclusive trademark rights. According to the Court, the trademark right guarantees its owner the exclusive opportunity to use the trademark first. The idea of the Court is that in this way the trademark owner is protected from the competition of other traders by prohibiting them to sell goods bearing the same trademark before the owner or a person authorized by the owner starts selling it. The Court further specifies that the trademark owner may not be based ad infinitum on the rights arising from its registration, in order to prevent the free movement of commodities in the different countries of the European Community. Once exercised by its owner, the intellectual property right is exhausted from the point of view of the control over the distribution of the product, which is protected by it. The exhaustion, however, does not restrict in any way the owner to see to violations that concern him. Proceeding from the idea of free movement of commodities as a basic principle of EC, in 1989 the Council of Europe adopted Directive No. 104, where the doctrine for exhaustion of rights is one of the main accents. Pursuant to art.7, paragraph 1 of the Directive, exhaustion of rights occurs after the goods are released on the Community market by the trademark owner or by another person, but with his consent. In other words, according to Directive No. 104 the first sale in a member-country of the Community of a product under a specific trademark exhausts the right of its owner or of his licence holder to exclude third parties from the trade with products under this trademark. It should be reminded that due to the unique character of the European Community its legal system is based on regulations and directives. Pursuant to art. 249 of the EC Contract regulations have a binding character and direct influence on the member countries. Article 254 of ECC specifies that directives are obligatory with regard to the goal they set, but grant the different countries the freedom within certain limits to choose by themselves the way to achieve this goal. Hence one of the biggest problems of applying the principle of rights exhaustion in EC arises. Directive No 104 introduces the principle for rights exhaustion within the Community limits, but grants the freedom to the member countries to decide whether to reproduce this principle in their national legislation, or apply the principle for international (outside the Community borders) exhaustion. The directive does not clarify whether the principle of exhaustion of a trademark right in the Community should be a minimal standard, which grants the member countries the freedom to apply rules chosen by them for regulation of the trademark right exhaustion (e.g. international exhaustion), or the criteria for trademark rights exhaustion should be effective only in the limits of the European economic zone. This is also the basic problem in the application of the doctrine for rights exhaustion in EC. On the one hand, a principle for common exhaustion of rights on the territory of the Community, which is introduced by a directive, and on the other hand a community of different countries with identified national legislation. It should be borne in mind that when a member-country of EC has adopted in its national legislation the principle of international exhaustion, such exhaustion will be effective in two opposite directions: (1) the movement of commodities inside the Community (by virtue of Art. 7, Para. 1 of Directive No 104 of the community law); (2) the movement of commodities between a member-country of EC and third countries outside EC, i.e. it is effective with respect to traders and markets outside the Community. On the other hand, when a member-country adopts the principle of national exhaustion, it will be effective in two unidirectional aspects: (1) regarding the movement of commodities on the territory of the respective country and (2) regarding the movement of commodities within the Community (pursuant to the provision of Art. 7, Para. 1 of Directive No 104). The characteristic feature of national exhaustion is that it is not effective with regard to traders and markets outside the Community. Having in mind the principle of free movement of commodities, the parallel imported goods should move freely within the Community limits, as they do not violate in any way the right of the trademark owner. If different regimes of exhaustion of trademark rights are allowed in different countries of EC, this will lead to raising barriers before the free movement of commodities inside the Community. These barriers in turn will give the trademark owners the opportunity to segment the European market and maintain different prices for one and the same commodity in the different countries of the Community. To prevent the opportunity for market segmentation, in 1994 the Council of Europe adopted Regulation No 40 (also known as Regulation on trademarks), whose art. 13, paragraph 1 specifies that "The trademarks registered in the Community do not entitle their owner to prohibit their use with regard to commodities, which have been released on the market in the Community under this trademark by the trademark owner or by his permission." Regulation No 40, however, does not answer the question whether the exhaustion of rights is effective with regard to the other member-countries in the cases when a commodity under a registered trademark has been sold by a member-country, recognizing the international exhaustion, to a country outside the Community. The answer to this question can be found in the interpretative decision of the European Court in Luxembourg on case No 355 of 1996 Silhollette Int'l Schmied v. Hartlauer Hadelsgesellshaft. |
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